U.S. Postal Service Posts Quarterly Loss of $5.2 Billion

By Angela Greiling Keane -
Aug 10, 2012

The U.S. Postal Service’s
announcement yesterday that it lost $5.2 billion in its third
quarter added to calls for Congress to help the agency that’s
supposed to run itself like a business and in many ways can’t.

The Washington-based service yesterday reported its 11th
consecutive quarter of losses and said it may lose $15 billion
in the fiscal year that ends Sept. 30. The loss was more than
any quarterly net deficit in the past 12 months among companies
in the Standard & Poor’s 500 and the Nasdaq Stock Market,
according to data compiled by Bloomberg.

Susan Collins, a Maine Republican who is an author of a
Senate bill to alter the Postal Service, called the House’s
inaction on a postal proposal “irresponsible.”

“Without legislation, the universal mail service that
drives a trillion dollar mail industry and supports more than
eight million jobs will be in jeopardy,” she said in an e-mail.

The service said it still will make payroll for its
workforce of 530,000 and pay suppliers when it temporarily runs
out of cash in October, part of the quarter that’s typically its
strongest with Christmas holiday letters and packages.

Postmaster General Patrick Donahoe called on Congress,
which is in recess until September, to pass legislation that
will help it cut costs.

The Postal Service, unlike competitors FedEx Corp. (FDX) and
United Parcel Service Inc. (UPS), is limited in how much it can cut
services, facilities or jobs to respond to changing business
conditions. It’s bound by law to deliver mail to every U.S.
address six days a week, a requirement not imposed on FedEx and
UPS, which rely on the postal mail carriers to deliver shipments
to U.S. residences.

‘Little Interest’

“It’s going to take a calamity,” said James O’Rourke, a
University of Notre Dame management professor. “When the post
office literally runs out of money to pay its employees and
suppliers, that’s what it’s going to take to get Congress to
act. They’ve shown little interest to this point.”

Resistance from Congress prompted the service to abandon
plans earlier this year to close as many as 3,700 rural post
offices, part of its strategy to reduce its size in an era of
less hard-copy mail and more e-mail. In 2006, Congress passed a
law requiring the service to pay now for future retirees’ health
care, something the Postal Service says it can’t afford and that
its unions say is unnecessary.

While the Senate approved a postal overhaul measure in
April that gave the service some of the changes it sought, the
House hasn’t scheduled consideration of its version, which would
need to be reconciled with the Senate’s proposal to become law.

Other Things

Congress has other important things to consider, and
getting agreement between the House and Senate bills would be
difficult because of their differences, said Rob Atkinson,
president of the Information Technology and Innovation
Foundation.

“The most likely thing is this gets punted down the field
a bit without any major action,” Atkinson said in an interview.

The House bill would create a control board for the Postal
Service if it defaults on financial obligations, as it did last
week by missing a retiree health-care payment to the U.S.
Treasury, while the Senate bill would provide money for
retirement incentives. About 165,000 postal employees, or 31
percent of its workforce, are eligible for full retirement,
Donahoe said yesterday.

Nothing’s Changed

House Speaker John Boehner, an Ohio Republican, told
reporters Aug. 2 that there would be “a lot of conversations
over the next five or six weeks” on Congress’s priorities for
September. Nothing’s changed this week, said Michael Steel, a
Boehner spokesman.

“As the speaker said at his press conference last week,
the important thing is that the American people know that there
will be no interruption in postal service,” Steel said in an e-
mail.

Senator Tom Carper, a Delaware Democrat who is a sponsor of
the Senate postal measure, criticized the House for its lack of
action to help the Postal Service.

“I’m not sure how much more evidence leaders in the House
of Representatives need before they realize that the Postal
Service is in dire straits and that the need for them to act on
comprehensive postal reform legislation is urgent,” Carper said
in an e-mailed statement. “At a time when we’re fighting to
create jobs and grow our economy, allowing the Postal Service to
go under is simply not an option.”

Loss Widening

The Postal Service said yesterday its net loss for the
quarter ended June 30 widened to $5.2 billion, from $3.1 billion
a year earlier as mail volume continued to decline, falling 3.5
percent during the quarter, compared with a year earlier, as
people and businesses continued to shift to e-mail and
electronic transactions.

The Postal Service hasn’t changed its forecast that it will
temporarily run out of cash in October, when a workers’
compensation payment to the Labor Department is due, Acting
Chief Financial Officer Steve Masse said in an interview
yesterday. The agency must make the $1.4 billion payment because
it’s a reimbursement for costs already incurred, Masse said.

Management said the cash shortfall will be temporary before
it rebounds during the Christmas holiday season.

“We have reached the point where we must conserve cash in
order to fund operations,” Chairman Thurgood Marshall Jr said
at a Postal Service board meeting yesterday in Washington. “Our
highest priority is to continue delivering the mail.”

Most of the service’s losses have come from the pre-funding
requirement for future retirees’ health care since it was
implemented in 2007, Fredric Rolando, president of the
Washington-based National Association of Letter Carriers union,
said in an e-mail.

“The irony of Congress continuing to insist on pre-funding
is that the Postal Service already has $45 billion in its future
retiree health benefits fund, more than any company in America
and enough for decades into the future,” he said.